These are additions to the property or improvements that enhance or extend the useful life of the property.

Capitalization

This is the anticipated stabilized rate of return from an investment. Also known as the cap rate.

Cash flow analysis

A projection of the buyer's estimated cash flow over the holding period.

Clear title

Any property that is free of any and all competing claims, mortgages, liens, and encumbrances.

Comparables

A term used to refer to area rents or competitive rental properties or area sales that have sold, implying that "rent comps" and "sales comps" are comparable in size, location, condition, amenities, etc., to the subject property.

Contingent offer

This is an offer to purchase property subject to certain conditions, including the buyer's approval of income and expense statements, title commitment, physical condition of the property, loan commitment, etc. - being met. The specific amount of time allowed to clear these provisions is called the inspection or contingency period.

A building, part of a building or obstruction which intrudes on another property.

Encumbrance

A claim, lien, charge or other liability attached to real property which may diminish its value.

Escalation clause

A clause in a lease providing for an increase in rent at a future time. This could be a fixed or pre-determined rate increase, or a cost of living increase that ties the rent to a cost of living index, or direct expense - the rent is adjusted according to changes in the expenses of the property such as a tax increase.

A contract where one party (the landlord) agrees to allow another party (tenant) the exclusive, common and/or joint right(s) to use a property for a specific period of time

Leaseback

A transaction where an investor purchases property and then leases it back to the seller.

Lease buyout

When a landlord offers to take over the current lease of a tenant.

Lessee

The tenant, or the party a property is rented to.

Lessor

The landlord, or the one who rents the property to another.

Letter of intent

A formal method of stating there is interest in a property, but it is not an offer and creates no obligation.

Lien

A hold or claim which one person has upon property of another as security for a debt, charge, tax or judgment.

Loan-to-value ratio

This is the principal amount of a loan as a percent of lending value. For example, if property is purchased for $500,000 and is financed by a bank loan for $300,000 the 'loan-to-value" ratio is 60% of the property's lending value to a borrower.

When the income from an investment property does not equal the usual expenses. The owner must come up with cash each month to meet these expenses.

Net income

The difference between effective gross income (property) and the operating expenses including taxes and insurance. The term is qualified as net income before debt service.

Net lease

A lease requiring the tenant to pay, in addition to a fixed rental, the expense of the property leased, such as taxes, insurance, maintenance etc.

Net-net lease

A lease in which the tenant pays a rent to the landlord that includes all real estate taxes only and does not include any portion of the operating expenses.

Net-net-net lease

Also known as a triple net lease, when the tenant pays rent to the landlord that does not include all property taxes and operating expenses.

Net operating income

Also known as NOI. This is the annual net income remaining after deducting all fixed and operating variable expenses, but before debt service and income tax. The specific formula is: NOI = Scheduled rental income + other income - vacancy and credit losses - operating expenses

Net rentable area

Also known as net rentable square feet. This is the total amount of square feet that can be used for rental income. It typically excludes stairways, elevators, hallways, common areas, etc.

Net rent multiplier

The factor resulting from dividing the net operating income into the sale or purchase price.

Non-conforming use

Property used for purposes that do not conform to the permitted uses in the municipal or provincial zoning by-laws.

The time required for the complete recovery of an investment; often used with the concept that all income is considered a return of capital until the entire investment is recaptured and that income received after complete payback is considered profit.

Percentage lease

A percentage lease is when the tenant pays a minimum rent then also pays a percentage of the volume of the business done on the premises whichever is greater. The percentage paid differs according to the types of business.

Phase I Level Audit

This refers to an initial environmental assessment of a facility by a qualified environmental engineering firm for potential contamination to determine if further investigations are warranted. Phase II level audit investigations would require further subsurface sampling, electromagnetic and hydro-geological study.

Pre-lease

The leasing of a property or space that has not been developed or constructed.

In a percentage lease, it is customary to have a clause that details the distance from the property that a competing store from the same chain may be located. This is usually a distance sufficient so that two stores from the same chain are not in the same trade area.

Retail premises

Premises used for the sole purpose of selling goods and/or services to the general public

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